NEW YORK, Oct. 29: The Blackstone Group and the Carlyle Group demonstrated on Thursday that the private equity industry is thriving amid a weak economy — but they did so in nearly opposing ways.
Blackstone, in reporting a 23 per cent jump in third-quarter earnings, said it has found the market to buy out companies unappetising.
“There are some good companies being sold, but we just can’t get to the prices that are required,” Mr Hamilton E. James, the company’s president, said Thursday morning.
Carlyle, though, is gobbling up companies. Not long after Mr James’s bearish comments, it announced a $2.6 billion deal for Syniverse Technologies, a voice and data services provider for telecommunications companies. On Wednesday, it completed a $3 billion takeover of CommScope, a maker of telecommunications equipment.
The divergent approaches highlight how cheap corporate debt is fueling the recovery of the private equity business. While it remains difficult to get a mortgage to buy a home or to get a loan to fund a small business, yield-starved investors are creating a robust market for corporate bonds and loans.
Private equity firms are seizing upon the corporate-debt boom in myriad ways. For the debt-heavy companies they already own, Blackstone and Carlyle are improving their balance sheets through aggressive refinancing. Corporate loans are now available to do multibillion-dollar buyouts, too, but the easy lending environment has created fierce competition for takeover targets, driving up prices. The corporate loan market “is almost hard to believe,” Mr James of Blackstone said.
Private equity’s outlook is certainly brighter today than it was one year ago. Buyout firms have made $173 billion worth of deals so far this year, up 95 percent from last year, according to data from Thomson Reuters.
Blackstone, co-founded by Mr Stephen A. Schwarzman, may be reluctant to do deals at the moment, but its earnings report underscored just how favorable the environment has become.
The New York-based firm, with $119 billion in assets under management, said its third-quarter profits were bolstered by sharp increases in the value of its real estate holdings.
More than 50 per cent of the debt carried by Blackstone companies has either been refinanced at a lower cost or modified with better terms, Mr. James said.
Carlyle, which is based in Washington and whose public face is Mr David M. Rubenstein, is proving that it is unafraid to pay a high price for companies. The buyout firm’s $31-a-share bid for Syniverse is 45 percent higher than the company’s closing price last month. Its $31.50-a-share offer for CommScope, which is 39 per cent higher than firm’s 30-day average stock price.